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Transocean, Diamond Offshore cut to Sell at Citi in negative sector call

  • Transocean (RIG +0.2%) and Diamond Offshore (DO +0.4%) are downgraded to Sell from Neutral with a $40 price target at Citigroup as part of a negative call on the offshore drilling services sector.
  • Pricing power is beginning to erode in the sector, the firm says, believing a clear shift in the balance of power at the bargaining table is occurring.
  • RIG opens flattish but slipped 1.8% yesterday after issuing its latest fleet status report which showed the Cajun Express deepwater rig received a contract to operate six wells at a dayrate of $495K vs. the previous rate of $600K.
  • Citi also cuts Noble Corp. (NE +0.5%), to Neutral from Buy.
  • Others to watch: RDC, ESV, SDRL, HERO, VTG.
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Comments (13)
  • chopchop0
    , contributor
    Comments (3940) | Send Message
     
    Not having $130/barrel oil will do that you.
    20 Dec 2013, 11:15 AM Reply Like
  • TJ Schoenlein
    , contributor
    Comments (413) | Send Message
     
    Just your typical short term thinking.
    Long: RIG,SDRL,NATDF
    20 Dec 2013, 11:26 AM Reply Like
  • jumpnjoey77
    , contributor
    Comments (821) | Send Message
     
    Thanks was able to pick up another 200 shares of DO under $55.
    20 Dec 2013, 12:23 PM Reply Like
  • FlaYankee
    , contributor
    Comments (123) | Send Message
     
    It has to be noted that both Transocean and Diamond Offshore operate with some of the oldest rig fleets which are facing soft demand as well as reduced day rates The oil majors are willing to pay up only for the most technologically advanced rigs especially after the disastrous BP oil spill which puts the drillers with the most modern fleets in the sweet spot for ultra deep water drilling. Companies like SDRL, PACD and NATDF are expected to prosper while RIG and DO will probably be forced to scrap some of their oldest rigs while struggling to put other older rigs into use. Long SDRL and NATDF.
    20 Dec 2013, 02:10 PM Reply Like
  • Davephd
    , contributor
    Comments (819) | Send Message
     
    Reminds me of the late 1990s when the oil drilling bubble burst. It took me about 4 years to get my money back rather than selling at a loss, a valuable lesson!
    20 Dec 2013, 02:27 PM Reply Like
  • u01bsb0
    , contributor
    Comments (707) | Send Message
     
    no doubt RIG will bounce back once again soon when it hits its price/book value. (sitting at 1.02 at the moment)
    20 Dec 2013, 06:48 PM Reply Like
  • chopchop0
    , contributor
    Comments (3940) | Send Message
     
    I sold RIG a few years ago during the "bounce" to the high 50s, for a profit, luckily. In retrospect, that has turned out to be a smart decision. It was probably time to sell when the stock got "Icahned" earlier this year.
    20 Dec 2013, 11:03 PM Reply Like
  • 9982841
    , contributor
    Comment (1) | Send Message
     
    Don't be fooled by this downgrade. How do you downgrade a stock with a current p/e of 10, a forward p/e of 8, a peg ratio of .52, and a stock that pays 4.77% in dividend? Not to mention that dividend is expected to increase by 34% in 2014. This stock will hit 65+ in 2014. You can bank on that!
    21 Dec 2013, 12:18 PM Reply Like
  • chopchop0
    , contributor
    Comments (3940) | Send Message
     
    If I had a dollar for everytime I heard that in the last 2-3 years, I wouldn't need to read SA anymore :)

     

    Seriously, this entire sector is dead in the water (pun intended) until we see much higher barrel prices
    21 Dec 2013, 04:09 PM Reply Like
  • blacktreechaser
    , contributor
    Comments (14) | Send Message
     
    As of this morning anyways, the options market does not seem to agree with Citi's downgrade.
    23 Dec 2013, 12:29 AM Reply Like
  • mitrado
    , contributor
    Comments (2019) | Send Message
     
    One day means absolutely nothing but I got in $SDRL at $39.14... I hope I don't crash and burn.
    23 Dec 2013, 05:05 AM Reply Like
  • happyguy
    , contributor
    Comments (207) | Send Message
     
    Icahn owns RIG, do you think he will allow CITI to through this stuff thinking this will drag it down to $40? Think again. Some news will pop up that Icahn is influencing RIG to make more changes and the stock will pop
    17 Jan 2014, 02:36 PM Reply Like
  • Davephd
    , contributor
    Comments (819) | Send Message
     
    "Deepwater drillers could plunge 35% on average, Barclays says"

     

    I will say it again, it reminds me of the late 1990s when the oil drilling bubble burst.
    28 Jan 2014, 04:04 PM Reply Like
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